What is a provident fund?
A provident fund is a pension savings account intended for employees and the self-employed. Funds deposited into the fund after 2008 enable pension savings for an annuity without an insurance component while receiving tax benefits for the deposits.
Important highlights for managing provident funds
- Provident funds can be transferred from one body to another, without costs and without harming the member’s rights at any time.
- Funds deposited into provident funds until 2008 are defined as “capital funds” and can be withdrawn from the fund as a lump sum. Moving the cash register from person to person will not harm this right.
- It is possible to transfer compensation funds to the Provident Fund finalizing employment relations to the Provident Fund as part of Amendment 8.
- You can switch between investment paths in provident funds at no cost and without harming the insured.
Lamda experts’ tips for provident funds
- Starting in 2012, you can enjoy a deposit to a provident fund according to amendment 190 and enjoy the benefits of investing in provident funds while maintaining liquid funds (expansion under amendment 190).
- It is of central importance to choose the body that manages the provident funds and to choose the route of investment in the fund, since over the years the differences between the funds can reach tens of percent.
- The younger we are, it is recommended to choose investment routes with a higher risk level in order to maximize the savings in the provident fund in the long term. In the provident funds, in some cases, the investment is made according to the Chilean model, which classifies the members in the investment tracks according to their age while maintaining the aforementioned rule.
- You can get a loan on preferential terms against the provident fund funds directly from the fund without the involvement of the bank.
- In many cases we find a provident fund that is managed by an investment house or an insurance company without our knowledge.